Southwest Case

4152 Words17 Pages
Case #6-0031

Enhancing Service at Southwest Airlines
Gary Kelly clicked the “DING” icon and smiled as the laptop screen filled with the familiar
Southwest Airlines website. “More peanuts?” the flight attendant poked him with a smile.
Kelly looked up and pointed to his screen. “The internet at 30,000 feet—that goes great with peanuts!” Scarcely five years at the helm of Southwest Air, Kelly was navigating the highflying airline through the biggest crisis in its 38 years of service. By focusing on simplicity and keeping cost low, Southwest had posted profits in every year for over three decades and had grown to be the fifth largest U.S. carrier. It had even logged a 12% increase in revenue in 2008 as the U.S. plunged into recession. But the
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Beyond its value, many customers enjoyed Southwest’s playful culture. With jokes and songs, its casually dressed flight attendants entertained as they welcomed customers aboard, reviewed safety instructions, and served snacks.

Southwest’s marketing positioned the airline as fun, with low prices that allowed frequent, convenient travel. From the beginning, its advertising was playful, often poking fun at the competition and emphasizing its low-price and convenience (see Exhibit 2).
Year after year, Southwest steadily expanded its network, entering new markets with a predictable impact on customers and competitors—referred to by analysts as the “Southwest effect.” The company would identify markets that appeared underserved and overpriced. To keep costs low and avoid the harshest competition, it focused much of its early expansion on medium-sized cities and secondary airports of major cities. Through heavy advertising and low introductory fares, it would immediately initiate a price war with incumbent carriers, stimulating overall market demand. Often the introductory fares would be 50% less than existing fares in that market and would be competitive with bus fares and the cost of driving.
The low fares would grow the overall demand at that airport, which Southwest would fill through further expansion. Typically Southwest would enter the new city with at least 10 flights operating from two gates and quickly

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